Hanwei Energy Services Reports Second Quarter Fiscal 2021 Financial and Operational Results

VANCOUVER, British Columbia, Nov. 04, 2020 (GLOBE NEWSWIRE) -- Hanwei Energy Services Corp. (TSX: HE) (“Hanwei” or the “Company”), today reported its financial results for the six months ended September 30, 2020. All amounts are in Canadian Dollars unless otherwise noted.

Update on COVID-19 Impact

Global commodity prices have declined significantly due to a collapse in demand attributed to COVID-19 in combination with an oversupply of oil due to disputes between major oil producing countries. The commodity price environment remains volatile due to COVID-19. The COVID-19 situation is dynamic and the ultimate duration and magnitude of the impact on the economy and the financial effect on the Company is not known at this time.

Financial and Operating Update

The Company has two reportable segments for its continuing operations: FRP pipe manufacturing and oil and gas production. The pipe segment produces and sells fiberglass reinforced plastic (“FRP”) pipe for the oil and gas industry and other infrastructure applications. The oil and gas segment is engaged in the exploration and production of oil and natural gas in Western Canada.

For the three months ended September 30, 2020:

• Total revenues were $1.1 million as compared to $2.6 million for the same period of the prior year. The $1.5 million or 60% decrease in revenue was due to a $1.4 million decrease in FRP pipe sales in China and a $0.1 million decrease in the oil and gas business due to lower commodity prices.
  
• FRP pipe sales totaled $0.7 million as compared to $2.1 million for the same period of the prior year. Sales in both periods were entirely contributed by the Company’s China market with no sales contributed from international markets.
  
  • For the Chinese market, sales were $0.7 million as compared to $2.1 million for the prior year. The decrease was due to the general downturn in the oil and gas industry with several orders deferred until the economic outlook improves and planned projects of a major customer being postponed due to flooding delaying pipe installations.
  • For the Canada market, sales were nil and equal to that in the same period of the prior year. The Canadian market has experienced a significant drop in activity in the oil and gas industry due to COVID-19 and the general fall in oil pricing that has significantly restricted capital programs in this market.
• The Company produced approximately 93 barrels of oil equivalent per day (boed) with a netback of $6.47 per boe generating revenues net of royalties of $0.3 million as compared to production of approximately 93 boed with a netback of negative $7.89 per boe generating revenues net of royalties of $0.5 million for the same period of the prior year. The decrease in revenue was primarily due to lower commodity prices with the increase in netback primarily due to lower well repair and maintenance costs, each as compared to the same period of last year. Production was from the Company’s Leduc Lands. The Company’s Nevis Lands are shut in as uneconomic to produce at current low commodity prices. The Company’s Entice Lands are also shut in as the Company pursues a solution for its gas handling at this field.
• Adjusted EBITDA from continuing operations for the three months ended September 30, 2020 totalled negative $0.5 million as compared to Adjusted EBITDA of $0.2 million for the same period of the prior year. The $0.7 million reduction in Adjusted EBITDA was mainly due to decreased operating income as a result of decreased revenue in the FRP pipe business, partially offset by a decrease in operating loss in the oil and gas business.